1. Will the Cabinet Secretary make a statement on the public sector contract currently awarded to Interserve to undergo building works at the Prince Charles Hospital in Merthyr Tydfil? 248

Thank you for the question. Cwm Taf Local Health Board is working in partnership with Interserve on the refurbishment of Prince Charles Hospital. The Welsh Government monitors the project in consultation with the health board.

Thank you for that answer. For those who may not be aware, Interserve were awarded a £25 million contract by Cwm Taf university health board to deliver part of a redevelopment there. Now, I have four questions I'd just like to quickly ask you about this issue, Cabinet Secretary. We know that, in Westminster, your party has called for a—admittedly unlawful—temporary ban on Interserve bidding for public contracts, but it's not the case here. You obviously don't agree with that decision and I wondered why that might be, and if you could perhaps expand on that.

In February 2018, in the wake of a profit warning by Capita, shares in Interserve slid by almost 20 per cent, and this was after a fall of 30 per cent the previous October. So, Cabinet Secretary, for me that is a sign of a company that's not in robust financial health. Were these financial problems taken into account, do you know, when either you and/or the health board awarded this contract to Interserve for the Merthyr redevelopment? Now, Interserve have negotiated a rescue plan going forward, which is very welcome, because an awful lot of people depend on them for jobs. But can you provide guarantees today, Cabinet Secretary, that there are plans in place to ensure that the work undertaken at Prince Charles is not going to be disrupted, and that you have mitigation against anything else untoward that may happen to Interserve? The UK Government have made the decision to continue to put contracts with or to maintain current contracts with Interserve, but what they say is they have a very robust monitoring mechanism in place, and they've got plans in place of a further crisis with Interserve. So, could you outline again for us today whether or not you have such a contingency in place here to protect our valuable investment?

Thank you for the questions. On the slightly mischievous suggestion that there should be a ban on future contracts, well, we'll take a prudent approach to anybody bidding for a future contract within the national health service or any other major capital challenge where the Welsh Government is seeking to award a contract. And, obviously, the challenges around the financial health of this company would be a factor in taking into account any future choices.

What we currently have, though, is that Interserve have already completed phase 1A of the refurbishment in Prince Charles Hospital, and this work is required because of a fire safety notice— so, undertaking that work and removing asbestos from the building. They've been awarded the next phase—phase 1B—and that was ordered several months ago, before the concerns were as sharp or as highlighted as they are now. So, they're continuing work that is already under way, and it is the point that that work is being undertaken in phases and resource being delivered in phases. We're not paying all of this money upfront and taking a huge risk with either the public finances or indeed with the work being undertaken.

It is the case that our 'Designed for Life' building framework agreement is in use and that does allow for us to both monitor the work that's been done and also, potentially, to move to an alternative supplier on that framework if any company should fail to meet their obligations. And that has happened in the past on smaller contracts, either part way through the delivery of a project, or, indeed, having won a tender. For example, a project in Ceredigion—the Cardigan Health Centre—after the initial award on 'Designed for Life', there was a need to relook again at who that person was, because the initial bidder couldn't meet the obligations they had undertaken.

So, yes, there is monitoring, yes, there is a plan, yes, there are obvious mitigation measures being considered by both the health board and the Government should Interserve fail to meet their obligations. But, at this point in time, the best information I have, and the health board have indeed, is that we expect Interserve to meet their obligations. But, obviously, it is a matter we'll keep under close review.

As soon as I'd read the report yesterday, I contacted the chief executive of the health board directly for information. I was already aware, of course, that Interserve were a contractor undertaking work on the refurbishment of Prince Charles Hospital. I've seen their work first hand as they've completed the first part of phase 1, and we're now moving into the second part of phase 1.

Now, the health board assured me, in light of the market uncertainty that was brought to their attention some weeks ago, that they had fully assessed the risk to proceed with Interserve as the contractor, who, of course, had already won and been awarded the contract for this second phase of the refurbishment and rebuild. So, my supplementary question to you, Cabinet Secretary, is whether, in your view, bearing in mind what the health board have said about how they have identified the risk of either not awarding the contract and retendering and the delay of the works for possibly another 18 months or so—. Having assessed all of that risk, they've decided to proceed, and I just wanted to ask you whether you are satisfied that there is no significant change in risk from the health board proceeding with the works as originally planned, and whether you're satisfied that they've taken adequate steps alongside the NHS shared partnership to manage that risk.

'Yes' is the simple answer, because I've actually discussed this matter yesterday with the chief executive of NHS Wales, so this is a matter that was on my mind before the topical question, because I am obviously concerned to make sure that the works are safe and that there is adequate monitoring of the risks and that risks are still acceptable, both to the public purse and obviously the delivery of the much-needed work that is being undertaken. No-one should be blasé either about the risks or indeed about the potential to simply up sticks and move somewhere else; there would be significant delay and it would affect the ability of the health service to meet its obligations, as well, of course, as the workers and uncertainty around their employment. So, yes, we will continue to monitor the performance of the contract, we will continue to be concerned about the financial health of the company and making sure that we protect the value that the public obviously want us to have oversight of to make sure that the appropriate works are delivered. And I recognise, as the local Member, that you will continue to keep a close watch on this matter too.

I have to say that I concur with the Cabinet Secretary's colleagues in London and with the union Unite in their very firm suggestion that it is not appropriate to be letting major new contracts to this company while they are in such a fragile financial condition. I appreciate what the Cabinet Secretary has said about this being phase 2 of an ongoing project and it may not be appropriate at this time for him to intervene, but can I ask the Cabinet Secretary whether he will give consideration to giving further guidance to the health boards as to the due diligence that they should undertake when they are looking at companies to which they are letting these massive contracts, which, of course, as he's rightly said, are hugely important and hugely significant with a lot of people involved in working in them? Obviously, Dirprwy Lywydd, all of us in this Chamber will want this contract to be successful and will be devoutly hoping that the company is sufficiently financially robust to be able to carry it through. But, again, as I say, I concur with the Labour Party in London and with Unite; I am frankly not sanguine.

To be fair, I think the responses that have been given today, and indeed the information provided directly by the local Member in setting up her questions, reinforce that this is not a new contract, this is a contract that was awarded several months ago. It is a contract on which the health board has already looked again at the potential risks involved in continuing with the work or not continuing with the work with Interserve itself. And, of course, financial health and due diligence are already a feature in the awarding of contracts under the Designed for Life building framework agreement. Of course, it'll be a matter on which, both centrally here within the Government as well as within the health board, there will be proper monitoring of the ability of the company to deliver on the works they have undertaken and contracted to do. New awards for new contract bids—of course there will be appropriate due diligence, and of course it'll be a factor where people will understand if you look at Interserve and any other potential contractors that this is about managing the risks that we have and that we understand and then see the work completed to make sure it provides good value for the public and a good place for people to receive and deliver healthcare. 

Thank you very much, Cabinet Secretary.